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tv   Nightly Business Report  PBS  August 23, 2013 1:00am-1:31am PDT

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this is "nightly business report" with tyler mathisen and susie gharib brought to you by. >> sailing through the heart of historic cities and landscapes on a river, you get close to iconic landmarks, to local life, to cultural treasures, viking river cruises, exploring the world in comfort. nasdaq freezes, the dow thaws. a massive system glitch stops trading for three hours as the dow scores the first gain in more than a week. can today's trading systems be trusted? and is your money safe? hewlett laggered. the world's largest maker of personal computers has the worst day in two years. is the company's turn around strategy in trouble? and the american worker, wages have been slashed for a
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decade as corporate profits rise and experts say the impact is showing up in a critical area of the economy. that and more tonight on "nightly business report" for thursday, august 22nd. if you wanted to buy sales of apple, google, intel, microsoft or any other stock listed on the nasdaq you couldn't. the reason, for more than three hours trading was halted because of a major computer glitch. it raised new questions about the safety of electronic trading and the impact on investor and business confidence in u.s. markets. this is the latest in a series of technical snatches that have paralyzed the market like the botched offer of facebook last year and the slash crack of the new york stock exchange in 2010. bertha comb joins us with me.
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what an extraordinary day. >> reporter: quite an extra orpd narcoticry day and a lot of folks are saying thank goodness it happened on a quiet thursday in august. essentially, if you look at the day's chart for the nasdaq composite, it essentially flat lined for three hours because none of the stocks were trading. what appears to have happened is a glitch in the system where you get the prices and quotes on trading stocks. with an inability to see those prices, they had to shut the system down. let me give you the timeline. about a quarter after 12:00. the nasdaq says they are seeing some problems with the system, in terms of price quioting. around 12:25 they stop trading not only on options where the problem first appeared but all of the nasdaq stocks and they were unable to trade stocks not just on the nasdaq system but other systems across different
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platforms. then at 1:00, they updated and said we are getting ready and preparing to restart trading. what we will do, they said, is start out with a few stocks we'll trade as a test for a few minutes to get pricing information and open things up without giving an actual timeline for when that would happen. as it turns out, the testing was just three different stocks. started at about 3:00 in the afternoon and then it wasn't until about 3:25 with 35 minutes left to go until the opening bell that they opened up all of the stocks here on the nasdaq. the stocks acted fairly resiliently, really didn't move much from where they had been before the overall nasdaq halt. this comes just 15 months after the massive trading glitch that prevented the smooth opening of the facebook ipo back in may 2012. that, the buckle as people call it on wall street, resulted in the nasdaq being fined $10 million by the securities and
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exchange commission because they felt the nasdaq had not done enough to upgrade it's system to make sure it could handle the volume that day. the sec is investigating this glitch but at the moment from what we know it appears to be a software glitch in that particular data stream. >> thank you very much, bertha coombs reporting. >> joining us to talk about more on the shut down is a principal at sandler o'neil. good to see you. can today's trading systems be trusted, and is my money safe? >> well, i think, you know, today's systems are strong, but these little glitches are, you know, blips that we have and i think is going to bring more let's just say oversight from the regulators and great effort by the industry to reduce these problems that we're having. >> you know, for investors at home watching all of this going on and listening to our news,
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they just throw up their hands, many of them say you know, this keeps happening and that's why many are staying away from the stock market. is that just the way it's going to be, or is there a way to simplify the system so we can keep the individual investor in? >> i think the industry and regulators are going to take a hard look at it this time. i think this is a call to arms so to speak. the one thing i sort of highlight is at least with this one, it doesn't appear like there was a lot of damages or the monetary damages to people because everybody was shut down. it wasn't like you were held? position while the stock traded away. the stock just didn't trade. so it is a crisis of confidence but the damages, i think, were limited in this problem. >> what if i put in an order to buy or sell a stock around that time? happens to me? did that order get executed? >> when the system shut down, i think that was the quote period
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when they started back up as bertha explained, when they started back up they allowed people to cancel quotes or orders or to put new ones in. so they allowed for that 15-minute window so people could get, you know, reposition themselves if they wanted to. you weren't going to get stuck with an order that you put in at whatever time this happened, you know, three hours earlier and still have to live up to that order three hours later. there was that grace period. >> richard, let me ask you a little bit about the business of being in the exchange business. we know that there have been glitches of the new york stock exchange and nasdaq, many more at the nasdaq. this also knocks down business confidence in the exchanges, and so there are a number of, you know, big companies that want to offer stock to the public, twitter, a lot of talk about twitter offering stock. do you think they would feel more comfortable of listing at the new york stock exchange, rather than the nasdaq after today's episode?
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>> you have a good point. i look at this as an industry issue because it could happen to anybody. and just so you know, the problem was with this price desemination stream and in complex terms, it's called utpsip, but nasdaq operates that for nasdaq listed stocks. the nyc operates it for nyc stocks and etf as well. it could have happened to anyone. what the industry needs to do, they need to go through this airplane accident, you know, analogy when there is a problem you have to take a serious look. you know, the transportation bored comes in and investigates and the fcc or regularer needs to come in and take a hard look and the industry to put in remedies and fixes. it doesn't feel like there was a lot done after the flash crash, and i think that's the level of
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response that's needed to regain the confidence you both speak of. >> richard, thank you for joining us tonight. despite those massive troubles in the nasdaq, it turned out to be a solid day on wall street. all the major averages, even the nasdaq posted gains. stocks got help from a surprise list of manufacturing both in china and here in the u.s. also helping leading economic indicators, a gauge of the country's economic health rose in july pointing to stronger growth in the second half of this year. and even though first-time jobless claims edged up last week, the government reported home prices surged again in june up nearly 8% from the same period a year ago giving home builder shares a boost. the dow today gained 66 points breaking six straight sessions of losses. the nasdaq, which was up 31 points when trading was halted ended the day up 39 points and the s&p 500 added 14 points. the yield on the benchmark
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ten-year treasury note rose above 2.9%, the highest in two years. despite those gains in the dow today, hewlett packard which has been the biggest gainer in the index so far this year dropped sharply today after sales of pcs fell again last quarter and companies sold fewer computer servers. now investors are wondering if meg whitman's five-year turn-around plan for the company may be in jeopardy. jon fortt has the story. >> reporter: hewlett packard's come back has a snag. the ceo saying she no longer expects to see revenue growth in 2014. that disappointing news sent the stock down about 12% in it's worst trading day in two years. now that made hp just the latest big business focus tech company to give a disappointing report. revenue came in short at ibm and/an and or kill. whitman in an interview today said things are still on track
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closing out year two of what she's called a five-year turn around. >> the reason i said five years is that is what i actually thought. i didn't say five because i thought it was three. when you do turn arounds, this are bumps in the roads, ups, downs, they are not usually linear. >> reporter: she said things went awry with slow sales of pcs and other factors. >> my view is we have a lot more work to do on supply chain, log gestics, enterprise group side and frankly, we have to make sure we have the right product for the right market segment. >> reporter: the question now, can hp fix the problems with new leadership. she replaced the head of the enterprise group with chief operating officer bill yesterday and brought marketing under communications chief henry gomez. there were plenty of challenges in the year ahead still especially since whitman promised to push into smart
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phones and get more ammobitiousn tablets. president obama in buffalo, new york today unveiling a sweeping new plan for rating the nation's colleges. the idea to evaluate schools on a host of met tricks with the goal of linking them to the amount of federal financial aids students at those schools receive. john joins us now from the white house with more on all of this. so john, let's start by asking what criteria is the administration going to be using when they rate the schools? >> reporter: they will be looking at things like graduation rates, how fast people graduate, what kinds of jobs they get after they graduate. and of course, also the tuition rates. administration is trying to push down the core inflation rate of college cost. this isn't about putting more aid in the hands of students but taking the aid out there, $150 million a year and using that as a lever to get colleges to try new things, online courses, other strategies to get costs
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down and they will need some help from congress to do it. >> i suspect, john, a lot of schools will really bristol at these met tricks to measure performance. >> reporter: certainly colleges that come out on the wrong side of the metrics will bristol and you can expect opposition in the congress that doesn't like the heavy hand of the federal government coming in. so the president has a big fight on his hand. what he can do on his own hook without congress is develop these score cards and use transparency to put it out there so parents and students can make decisions and try to affect change that way as well. >> what about the role of congress in this? can congress do? >> reporter: if you're going to change the way federal financial aid flows and change the colleges that get that financial aid, congress is going to have to say yes. administration had difficulty getting congress to go along
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with their plans for secondary education with a small amount of federal aid there. this is another case where the federal aid is not the amount of money spent by colleges. states control state universities and private colleges are private but they will try to do what they can on their own and see if they can get congress to go along, if not in this administration, pave they way for a future administration. well, still ahead, a lost decade for wages. a new report shows pay hasn't budged for american workers for a long time, and that could start pressuring a key area of the economy. first, let's take a look how the international markets did today.
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here is something you have may not have expected to hear. yahoo got more web traffic last month than google, another feather in the cap of the ceo marissa mayer. come score reports yahoo attracted 4 million more unique visitors at the websites in july than google where myer used to work. this is after yahoo redesigned the website and buying up small websites that are quite popular with younger customers. we begin the market focus tonight with another retailer reporting a troubling quarter. abercrombie and fich blamed a drop in in store visits by shoppers and that's not all. the chain says business will decline more during the crucial back to school quarter and issued a weak profit forecast. shares plummeted nearly 18% to 3
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3 -- 38.53. aeropostale plans to close stores. the company blamed problems on heavy discounting. shares dropped almost 4% during the regular session to $10.98 and fell as much as 10% in after hours. the good news beat out the bad for game stocks. the video game retailer said second quarter profit fell 50% but the company was bullish on prospects for the rest of the year as new game consoles are slated to hit the market in time for holiday sales prompting game stop to raise the outlook. the stock jumped 9% to close at $51.91. j.c. penney's bored adopt add shareholders rights plan to stop new investors from gaining
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control. the move comes after bill ackman, the largest shareholder says he may exit his entire stake in the retailer. it's known as a poison pill. the stock finished 1% lower today. investors in sears aren't seeing the softer side but rather the weaker side. a rough day for the stock after the retailer posted a wider than expected second quarter loss. revenue fell, margins prer sured. the stock down 8% to $39.72. do you feel like you're earning less money now than you did four years ago when the recession officially ended? well, if you said yes, you have plenty of company. a new survey shows the average household income in the u.s. is currently lower than it was in 2009. what does that mean for the american middle class and for the overall economy? hampton pearson gets answers. president obama is back on the road this time in upstate new york telling a large crowd at the university of buffalo,
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five years into his presidency reviving the middle class is the highest domestic priority. >> any middle class family will tell you, we're not where we need to be at. because even before the crisis hit and it sounds like buffalo knows something about this, we were living through a decade where a few at the top were doing better and better, most families were working harder and harder to get by. >> reporter: a new study shows how much earning power the middle class lost since the recession began. in june medium income was $52,100. if you go back to 2007 when the recession began, median income is down 6.1% or $3400 according to research. a separate study says wages have been stag innocent for a decade
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leaving a small-growth economy with a tight labor market leaves workers with little leverage. >> the fact that not only are jobs too hard to come by, but also, if you have a job, the fact there is so much slack meanings your earnings are flat or falling after you adjust for inflation. >> reporter: the same economist say lost wages and lost purchasing power translates into less consumer spending, even though the overall economy is growing and unemployment rate is declining. for "nightly business report," i'm hampton pearson in washington. >> the wages of many average workers haven't grown but a different story with chief executives and now federal regulators will propose a role to require companies to disclose how much they earn showing the gap between their salaries and those of the average rank. marry thompson has more.
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[ applause ] >> reporter: after president obama signed dodd frank into law the srkcc will require companie to disclose the ceo's pay to the pay of the workers. brandon reese notes the average making $12 and a quarter million last year a ceo now makes 350 times more than the average worker. >> that ratio is up from 42 times to one 30 years ago. so dramatic inequality and that's hurting employee moral and productivity and leading to increased turnover and that's what this disclosure rule is meant to fix. >> reporter: reese claims the ratio gives director whose determine a ceo's pay a invaluable tool that lessons the focus on what a ceo makes relative to other ceos and
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relative to the employees. the soon to be proposed rule appears somewhat less strin get than expected. they will use a statistical sample rather than looking at all of their workers' pay. the firms won't be required to calculate a workers' pay the same way they calculate a ceos' pay. companies said it creates an administrative burden. the center for executive compensation says calculating the ratio takes time energy and resources that deflect focus from far more productive uses like generating growth. the proposal rule it's likely to be made available for public comment between 30 to 90 days before the commissioners have the final vote, a vote that will give the working class a lot to say on executive pay. for "nightly business report," i'm mary thompson.
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and coming up, a prescription for fraud. we'll show you how the feds are fighting back on a problem that costs taxpayers and our healthcare system billions of dollars dollars a year. first, how commodities, treas y treasuries and currencies faired today. elih lily is accused of spending 5 million dollar to chinese physicians in exchange for prescribing it's insulin product. it hasn't admitted or denied any wrongdoing. they are investigating similar bribe charges against two other companies. health care fraud is one of america's costliest issues. an estimated 80 billion-dollar
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sink hole every year. part of that takes place in small pharmacies across the country and andrea day got a front row seat to an undercover sting. >> reporter: we rode along with federal agents and local agents while they took down a pharmacy owner accused of milking medicaid and taxpayers out of almost a million bucks. we're now just blocks away from dna pharmacy in brooklyn, while another team is following the drugstore owner. watching from a distance as he leaves his house. >> following the guy now. >> reporter: as the team waits for word the owner is close, special agent in charge tom o'donald walks us through the alleged scheme. >> he billed medicaid for prescriptions he didn't need. >> reporter: a plan that went on for more than a year. he enticed patients to bring prescriptions to his pharmacy,
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but instead of filling prescriptions and handing out drugs, he allegedly handed out cash. >> 20 bucks, 30 bucks, 40 bucks per script. >> reporter: from there investigators said he billed medicaid for drugs partially filled or never dispensed at all, including billing for refills and would rake in the cash. focussing on medication for hiv drugs. >> they reimburse 14 to $1500 for a 14-day supply. when you have drugs that high for reimburse mtd, there is a black market for it. >> reporter: a scheme, according to investigators, that is being played out right now at small pharmacies all over the country. so why would patients want to get involved? he says in some cases patients don't want to take their medication and are just looking for pocket money. >> a lot of times they will go
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back and report their medications were stolen, get police reports and get a doctor to write them another prescription and go out and attempt to refill it again. >> reporter: the pharmacy scheme, a growing piece of healthcare fraud. >> it's between 184 million to $630 million of fraud a day. that is huge. it's the second largest white collar crime in the united states. >> reporter: we keep watch as the pharmacy owner walks up to the gate and opens up for business. >> they are going. >> reporter: investigators make the move. once inside, investigators show him this video, it's an undercover agent posing as a patient. you can see the owner hand a prescription to the agent. then he walks her outside and gives her $25, cash. investigators say as an incentive to come back and bring others. >> this type of medication, more and more and more. every time you bring me prescription, i give you more.
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>> reporter: he looked at the video, what did he say? >> he said straight up that's not me. >> reporter: 12:00 noon, finally they walk the owner out in cuffs and a search team moves in and hours later investigators emerge with boxes of evidence. one alleged scheme busted but many more to go. for "nightly business report," i'm andrea day. the brooklyn district attorney's office is bringing the case to a grand jury. he is facing 17 charges, including health care fraud, grand larceny knand false flyin business records. his attorney maintains his innocence and will defend himself in court. >> amazing story. that's "nightly business report" for us. i'm susie gharib thanks for joining us tonight. >> i'll see you-all in a couple weeks. i got a couple weeks vacation. >> have a good time. >>ly.
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i'm tyler mathisen, thanks for watching. see you back here tomorrow. "nightly business report" has been brought to you by. >> sailing through the heart of historic cities and landscapes on a river, you get close to iconic landmarks, to local life, to cultural viking river cruises, exploring the world in comfort.
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